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Gov. Parnell seeks spending restraint

JUNEAU — Gov. Sean Parnell said Wednesday that he wants to rein in state spending amid global economic uncertainties and declining oil production here in Alaska.

The Republican said he met with his commissioners last week to make clear his desire for fiscal restraint — something he’s been preaching since taking office — and to let them know that when they write their budgets for next year, they should take into account Alaska’s economy, the global economy, the missions of their agencies and priorities set out by the state constitution.

In an interview Wednesday with The Associated Press, he said he wants commissioners looking for savings and ways to make state agencies more efficient, but he said he hasn’t yet set any parameters for agency spending.

Parnell’s budget proposal for fiscal year 2014 is due in December, about a month before the Legislature returns to session.

While Alaska wasn’t hit nearly as hard as other states by the recession and has billions of dollars in reserves, oil production — the state’s bread-and-butter — is declining, and Parnell said economic concerns overseas could lead to lower demand for oil, thereby reducing oil prices and putting the state’s coffers “at risk.”

As it stands, he said, the state is looking at a decline in revenue next year, due to factors such as oil prices, production and credits. If that situation holds, he said he will seek to cut spending from this year’s levels. An updated revenue forecast is expected later this year. “When oil prices go down, our spending is going to go down, too,” he said.

Total spending for this year’s operating and capital budgets topped $12 billion, and that was after the governor and lawmakers agreed to a spending limit on infrastructure and other capital projects. Parnell said the current budget plan balances on $104-a-barrel oil. North Slope crude prices, since July, have ranged from around $99 a barrel to about $109 earlier this week.

The administration has blamed budget increases over the last several years, in large part, on formula-driven programs, such as education and Medicaid. There was debate during the last regular session over education funding, as school districts sought additional money to deal with rising energy and other operational costs. Some lawmakers wanted greater accountability for how districts were spending their money.

Parnell called a plan that passed the Senate, and would have provided automatic funding increases over three years, the “ultimate giveaway,” because it didn’t require results in return.

He said Wednesday that he has focused on a goal of a 90-percent graduation rate in the next 10 years, which he said he doesn’t believe can be achieved through how education is currently delivered in the state. He said he’s looking for innovative ways to do that. He sees recently adopted education standards as a start toward transforming the public school system and state-funded scholarships for high school graduates — an effort he championed — as playing a role, too.

But he said there will be a renewed focus on kindergarten through 3rd grade and on distance learning. And there will be a need for additional funding, though how much isn’t clear. He said that will be evaluated as priorities are set during the budgeting process.

“Again, it’s going to take a mindset change about delivering education differently and delivering it for results for the kids,” he said. “Not about beating our chests over how much funding or how little funding” is provided. Funding is important, he said, but also “the means to the end.”

When it comes to Medicaid, he said he’d like to see governors band together to seek greater flexibility from Washington in designing programs for recipients in their states.

Under the federal health care law, states can expand Medicaid coverage for adults to 133 percent of the federal poverty threshold beginning in 2014. According to a 2011 state report, which provided a long-term forecast of Medicaid enrollment and spending in Alaska, the federal government would cover the cost for the first three years, and states contributing toward the cost of the newly eligible individuals after that.

Parnell said he’s leery of the expansion “because our history with the federal government right now is they cut what they promise to fund.” He said he wants to thoroughly understand the costs to the state before making a decision.